A Very Brief of Legitimacy of Islamic Product in Malaysia

The main objective of Islamic Bank is to help Muslims to use their surplus in getting reward base on the Islamic teaching in Quran and Sunnah. This means the activities by Islamic banks should be legitimate or halal in accordance with Shariah. For the activities to be eligible in Islam, the activities should not involve any form of interest (Riba or usury), uncertainty and gambling element.

To comply with the Shariah, Islamic banks offer their product by applying some Islamic concept into the designation of the products. We can see this in the Islamic products themselves. Saving account apply the concept of Al Wadiah. Al Wadiah refers to goods or deposits, which have been deposited by depositors (owner) to the bank (custodian) who is not the owner, for safekeeping. As wadiah is a trust, the depository becomes the guarantor and, therefore guarantees repayment of the whole amount of the deposits, or any part thereof, outstanding in the account of depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation.

Meanwhile, for financing, Islamic banks offer public variety of products which follow the concept of Mudarabah (profit sharing), Musharakah (joint venture), Ijarah (leasing) and etc. If we further study these concepts, we will find out that they do not involve any Riba but they provide rewards and profit sharing as